Is Salesforce.com the New Pets.com?

Fred Hickey once again devoted a large portion of his monthly newsletter to dissecting the absurd valuation of Salesforce.com (CRM).

Here are the top five reasons Fred Hickey is massively bearish about Salesforce.com (CRM).

Salesforce.com sells at 109 times fiscal year 2011 earnings (ended in January). For 2012 the numbers are even more staggering. Hickey calculates that GAAP earnings are expected to be just 8 to 11 cents per share meaning that CRM is now valued 1,625X estimated fiscal 2012 earnings. The current stock price of CRM is $130.

Accounting Tricks. Salesforce.com is reporting “non-GAAP” earnings reminiscent of a tech company during the dot.com bubble. 80% of the non-GAAP numbers are stock based compensation of $42 million last quarter. The stock based compensation is significant considering that revenues were $457 million.

Massive Insider Selling. CEO Marc Benioff sold 10,000 shares ever day that the stock market was open. Frank van Veenendaal, President, Worldwide Sales and Services has been selling shares on a weekly basis.

Costs are increasing at a faster pace than revenues. Hickey noted, “For the fourth quarter, revenues were up 29% year-over-year to $457 million, but costs of revenues grew at a faster pace (36%) and operating expenses jumped by 40%.

To get a feel for how out of control spending is at CRM you can peruse this article from CNN.

The sales force gets hefty bonuses. The biggest earners get to enjoy goodies like “Breakfast at Tiffany’s” — a $5,000 shopping spree offered during last year’s sales incentive trip to Hawaii. Since Tiffany doesn’t have a store in Kauai, Salesforce.com hired local carpenters to recreate one, shipped in $1 million in merchandise from surrounding islands, and hired a violin player, chef, and even Miss Hawaii to add ambience.

Not that they don’t spread the wealth around: Full-time employees receive a “Mahalo Bonus” (Hawaiian for “thank you”), twice a year — up to 140% of the target payout. And those lucky employees who’ve received stock have seen their shares more than double in value over the past year.

However, it should be noted that Hickey has not shorted any shares of CRM as he rarely shorts stocks. He does have a tiny put position on CRM shares but is waiting to add to his bearish bet in the next couple of months.